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April 24, 2013

Raymond James Tops Estimates on Strong Sales in Early ’13

Net income for the quarter ending March 30, though, dropped from the prior quarter

Raymond James CEO Paul Reilly addresses the press in Dallas during RJFS national conference.

Raymond James Financial (RJF) said late Wednesday that its revenues for the quarter ending March 31 were $1.14 billion, a jump of 31% from the year-ago period and 3% from the earlier quarter. The sales results topped analysts’ expectations and reflect, in part, the addition of results produced by some 900 advisors and other employees with Morgan Keegan, which the company acquired last year.

Net income for the quarter was $80 million, or $0.56 per share—up from $69 million, or $0.52 per share in the year-ago period, but slightly below the results of the prior quarter, when it had net income of $85 million, or $0.61 per share. Excluding special items, earnings were $0.68 per share (on net income of $96.5 million), up 6% over its EPS last year and down about 1% from EPS in the quarter ending Dec. 31. Analysts polled by Reuters had expected earnings of $0.68 after special items.

“Our major segments performed similarly to last quarter with the exception of Capital Markets, which was impacted by the lackluster M&A market. This shortfall was nearly offset by our Proprietary Capital segment due to our sale of Albion Medical Holdings, a portfolio company,” said CEO Paul Reilly in a press release.

Financial assets under management grew to a record $51 billion, up 30% from last year and 10% from the earlier quarter. Assets under administration reached a record for the company: $407 billion, up 39% from a year ago and 5% from the quarter ended Dec. 31.

(This week, the company is hosting its annual business-development conference for independent advisors in the U.S. in Dallas.)

Advisor Results

The Private Client Group reported fees-and-commissions growth of about 31% over last year and 2% over the preceding quarter to $615.2 million. Sales for the group were $726.8 million, an increase of 28% from last year and 2% from last quarter.

Pre-tax income for the group grew 14% from last year to $52.7 million, up $200,000 from the earlier quarter. The company said that higher technology costs led to the flat results.

(The firm spends over $200 million a year on technology and increased this spending 30% over the past two years, executives said on Monday.)

The headcount for advisors in PCG worldwide was 6,297—up from 6,289 as of Dec. 31 and 5,396 a year before. In the United States, the unit includes 5,431 independent and employee reps, a slight increase from 5,427 in the earlier quarter and a jump of about 900 from 4,532 in March 2012 (before the Morgan Keegan purchase).

“During the quarter, we successfully converted the Morgan Keegan private client accounts to the Raymond James platform, which allowed us to begin to execute on our next round of cost savings initiatives,” the company said in a press release.

On April 11, the firm trimmed its workforce, mainly in IT roles tied to the Morgan Keegan platform, by about 160 positions. It estimates that this could lead to about $5 million of compensation savings on a quarterly basis going forward.

“The successful conversion of the Morgan Keegan Private Client Group onto our platform marked a significant milestone in our integration,” Reilly said. “We are now able to operate under the unified Raymond James brand and focus on the growth of our businesses. However, we must also complete our cost-reduction programs over the next one to two quarters.”